Stocks Lower into Final Hour on Rising Euro Sovereign Debt Fear, Korean Peninsula Tensions, China Inflation Concerns, Insider Trading Scandals

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Every Sector Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 20.91 +13.83%
  
• ISE Sentiment Index 127.0 +18.69%
  
• Total Put/Call .93 +17.72%
  
• NYSE Arms 2.42 +54.05%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 93.72 bps +1.97%
  
• European Financial Sector CDS Index 144.37 bps +21.36%
  
• Western Europe Sovereign Debt CDS Index 174.0 bps +3.37%
  
• Emerging Market CDS Index 228.47 bps +3.78%
  
• 2-Year Swap Spread 19.0 +1 bp
  
• TED Spread 16.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .12% unch.
  
• Yield Curve 231.0 -2 bps
  
• China Import Iron Ore Spot $164.90/Metric Tonne +.30%
  
• Citi US Economic Surprise Index +30.40 +.7 point
  
• 10-Year TIPS Spread 2.10% -3 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating -250 open in Japan
• DAX Futures: Indicating +27 open in Germany

Portfolio:

• Lower: On losses in my Medical, Biotech and Technology long positions
  
• Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades meaningfully lower on China inflation concerns, rising Korean Peninsula tensions and increasing euro sovereign debt angst. On the positive side, Retail, REIT, Telecom and Defense shares are holding up relatively well, falling less than 1.0%. Small-cap shares are outperforming again. The 10-year yield is falling -5 bps to 2.75%. The S&P GSCI Ag Spot Index is rising +.79%. Weekly retail sales rose +2.6% this week versus a +2.7% gain the prior week. On the negative side, Homebuilding, Coal, Gaming, Oil Tanker, Paper, Oil Service and Steel shares are under significant pressure, falling more than 2.5%. Copper is falling -1.4% and Gold is gaining +.68%. The Greece sovereign cds is gaining +2.86% to 1,047.47 bps, the Russia sovereign cds is rising +6.66% to 153.56 bps, the Hungary sovereign cds is gaining +4.24% to 320.48 bps, the Portugal sovereign cds is surging +6.14% to 481.11 bps, the Spain sovereign cds is climbing +6.45% to 300.42 bps, the UK sovereign cds is rising +4.97% to 65.65 bps and the Ireland sovereign cds is gaining +9.23% to 571.35 bps. The huge jump in the euro financial sector cds index remains very troubling. This index is now breaking out of the range it has been in since early July. Given the jump in eurozone debt angst, recent equity gains, China inflation fears, insider trading scandals, Korean peninsula tensions and financial sector Basel III concerns, the broad market is still holding up better than I would have expected, which is a big positive. Market leaders remain relatively firm. However, these concerns appear to be beginning to take their toll and further weakness could materialize tomorrow before the Thanksgiving holiday. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, seasonal strength and short-covering.